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FEMA Changes Encourage Private Flood Insurance

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In the absence of legislative reform by Congress, there’s only so much the Federal Emergency Management Agency can do to encourage the growth of private flood insurance. But FEMA, which oversees federal flood insurance, has come up with a few small but meaningful program changes that will make it easier for households to switch to private insurance if they can get a better deal that way.

First, the agency has lifted the requirement that households retain their federal coverage if they switch to private insurance before their coverage term is up. Prior to this change, households had to maintain their federal coverage even after switching to private coverage, which meant they had to pay two sets of premiums if they made the switch.

And second, insurance companies that offer federal coverage can now also offer private coverage as well, either their own or another company’s. Prior to this change, if a company offered the federal option, it was prohibited from providing a private alternative.

The agency has also made two other small changes to make life easier for homeowners who appear to be in a flood zone.

First, if a homeowner's state uses what’s known as LiDAR technology to collect elevation data, owners can now use that data to demonstrate they don’t need flood insurance. That can save them as much as $2,000 on the cost of a separate elevation certificate. The downside here is many states are not yet using the new technology to collect elevation data, though Minnesota and North Carolina are two examples of those that do.

And second, FEMA’s procedures for newly mapped flood areas will be extended to apply to more properties. That means more owners will be able to start their premiums at a lower rate and only gradually reach responsibility for full premiums.